Tuesday, 10 April 2012

Not Keeping Up With the Joneses, ...

American taxpayers own close to 200,000 vacant houses, and over the next year they will spend more than $40 million just to mow lawns at these properties. Taxpayers also foot the bills to paint walls, fix cabinets, plant flowers and more -- expenses that just last year, exceeded a half a billion dollars.

The housing bailout has already cost taxpayers $124 million [correction: $124 billion], now Americans are spending hundreds of millions more fixing up foreclosed homes to try and sell them. It is a bizarre and expensive side effect of the housing market collapse and failure of Fannie Mae and Freddie Mac, the mortgage giants that went into federal conservatorship in 2008.

Don’t expect those outlays to get covered in the eventual sale price, either. All that remodeling, lawn-mowing, and painting would only impact the sale price significantly if inventory was tight. The markets will have a glut of these foreclosed properties over the next several months, perhaps for the next couple of years. Thanks to low employment and high energy prices, demand will remain light for the foreseeable future, too.